The Financial Services Secretary to the Treasury (Lord Myners): Everyone in the country will benefit from better banking services. The Government are taking action in the areas identified by Which?. For example, the Financial Services Authority has introduced new business conduct rules for retail banking with effect from 1 November 2009. A review of the sale and distribution of retail savings and investments is addressing structural problems in how products are sold. Work is under way to improve standards of complaints handling. These and other measures to improve the customer experience support the campaign of Which? and will help to restore trust in the banking service community.
Lord Dykes: I thank the Minister for that response. I assume that the Government will be present at or at least encourage the meeting on 4 February, when the public will be further consulted by Which?. In the mean time, are the Government convinced that the banks have at long last learnt a few lessons and will really try to help personal customers and SMEs come out of this recession?
Lord Myners: I am sure that the Government will encourage the event on 4 February, and we are delighted to see Which? sponsoring this inquiry. I and other members of the Government will give evidence.
As for the need for the banks to focus on the needs of customers, I can do no better than to quote the noble Lord, Lord Roberts of Conwy, in his contribution last week, when he talked of the need to put the customer back at the centre of the banking relationship. The banks are beginning to appreciate this and understand that sustainable growth and strength is best achieved by meeting the needs of their business and private customers and moving away from esoterica and the creation of toxic instruments, which may have appealed to those with a strong mathematical background but were really quite distant from servicing the needs of the economy. The noble Lord, Lord Roberts of Conwy, had the right message for all banks: focus on the needs of your customers and, if you do that, your business will prosper.
Lord Newby: The Minister expressed his support for Which?. Does that mean that when the Financial Services Bill comes to your Lordships' House, the Government will support the amendments that Which?is promoting on credit cards-for example, on unsolicited limit increases and to ensure that the most expensive debts are automatically paid off first, not last?
Lord Myners: I thank the noble Lord, Lord Newby, for his question. I have not studied in detail the submissions of Which? in connection with that Bill, which will come to your Lordships' House fairly soon, but there are provisions in the Bill that deal with unsolicited credit cheques, which have been the bane of many people on low incomes, who are tempted to cash these cheques and move into debt in a way that is unwise. No doubt we will also look at details around the charging regime for credit and debit cards.
Baroness Noakes: My Lords, Which? refers to the increasing and unhelpful consolidation of banks-some of which, of course, happened with the connivance of the Government when Lloyds took over HBOS. Do the Government accept that there is insufficient competition, which operates, as Which? claims, to the detriment of consumers?
Lord Myners: The primary cause of the increased concentration of banking was of course the move to undermine the mutuals by encouraging them to demutualise, and I believe that that was done not by this Government but by a previous one. To be more constructive, though, as I know the noble Baroness would always wish me to be and as I always seek to be, we welcome the arrival of new competition in high street banking, as we have seen with the recent announcement from Virgin, with Tesco's significant commitment to become a major force in retail banking-we know how successful that organisation can be when it puts its might behind commercial success-and with the disposals that are to be made by the Royal Bank of Scotland and Lloyds bank. We see an expectation of stronger competition. I agree with the noble Baroness, however, that it would be good for the economy if there were more competition in the banking sector, and the Government will make efforts to facilitate that.
Lord Tomlinson: Does my noble friend agree that for many people-particularly, but not exclusively, poor people-banking services can best be provided by the development of credit unions? Are the Government now happy, following the initiative that he took in writing to the British Bankers' Association, that banks are adequately playing their role in promoting credit unions?
Lord Myners: I share my noble friend's great support for credit unions; he has devoted much time, energy and influence to promoting the case for growth in their activities. After a recent debate in this Chamber I made contact with the major banks and their trade association to encourage them to make further support available for credit unions, both through funding and through seconding employees so that they share knowledge and access to systems. I think that the banking sector would be wise to see this as an opportunity where, again, it can address some of the reputational and trust issues that the industry currently faces by showing a willingness to support credit unions, which do so much good in taking banking services to the previously unbanked.
Lord Myners: Interest rates are set by the Monetary Policy Committee. Low interest rates are entirely right for supporting economic activity, but I appreciate that these rates are very low for those who depend upon their savings for their income in retirement. This will require imaginative solutions from the banking sector. We know that the retail banking interest rate market is very competitive-there are plenty of products on offer now with interest rates of over 4 per cent-but this morning, together with the shadow Chief Secretary, I attended a launch by the Stock Exchange of a new facility to make access to corporate bonds more attractive for retail savers. There need to be market-based solutions to that issue as well.
To ask Her Majesty's Government what assessment they have made of the number of those paying the higher rate of income tax who have left, or plan to leave, the United Kingdom tax jurisdiction in the current and next financial years.
Baroness Valentine: The Chancellor recently stated that the 50p top rate of income tax was not a matter of ideology. If in practice it will do little to increase tax revenue and instead may drive away many of those contributing the most to the Exchequer, what is it a matter of?
Lord Myners: It is a matter of meeting the finance requirements at a time when the public sector has a very large deficit. The broadest shoulders must, quite rightly, bear the greatest burden. We are talking about less than 2 per cent of the population by income, a section which has enjoyed an increase in earnings at more than double the median rate over the past 10 years. However, it is not a commitment of ideology. This Government wish to see a reduction in the higher rate of taxation as soon as it makes sense from the point of view of prudent macroeconomic management.
Lord Forsyth of Drumlean: My Lords, can the Minister indicate whether the first Minister, Secretary of State, et cetera, et cetera-the noble Lord, Lord Mandelson-was speaking for the whole Government when he said that the top rate of income tax at 50 per cent was going to be a temporary measure?
Lord Myners: In her supplementary question the noble Baroness has already quoted the Chancellor of the Exchequer saying it is not a matter of ideology. I have also said that we wish to see a reduction in the top rate of taxation as soon as it makes economic sense. I suggest to the noble Lord, Lord Forsyth, that it is not possible to drive a wedge between the First Secretary, the Chancellor and myself on these matters: we are at one. That gives us greater credibility. It may well be a route that the Opposition Front Bench wants to try-although as I warned last week, we have to continue to listen to our wireless very carefully to keep up to date with Tory thinking on matters. We have seen this over the weekend: now we are looking forward not to an age of austerity but to one of slow and modest cuts in public expenditure.
Lord Newby: My Lords, the Question refers to people who are leaving the country, possibly as a result of tax levels. It is normally suggested that people go to Switzerland, particularly if they are bankers. Has the Minister had any discussions with the Swiss authorities over their attitude towards high levels of remuneration, in particular bankers' bonuses?
Lord Myners: The Swiss taxpayer has of course had to pay a huge sum of money to support UBS after its collapse. One would need to be very careful about taking into one's financial system those who were seeking to escape from good, effective, prudent supervision and regulation. From my own perspective, if there are people in the hedge fund community who find that the new regulatory climate is too hot, invasive and demanding in the UK and want to go elsewhere, that is their choice, but I would warn those who take them in of the menace they could represent.
Baroness Noakes: My Lords, according to the World Economic Forum's report on competitiveness, the UK was ranked fourth in terms of the lowest tax burden and tax evasion in 1997, and 84th in 2009-10. Does this have something to do with the Government's policies of high taxation?
Lord Myners: The UK has the lowest rate of corporate tax in the G7 at 28 per cent. The tax-to-GDP ratio is 36.1 per cent, which continues to be below the EU15 average and the G7 rate. At 18 per cent, the CGT rate is extremely low, and we continue to take measures through the tax system to encourage new business. I do not think the answer lies in taxation.
Lord Tomlinson: Does my noble friend recall that from the date the Labour Government were first elected, some years ago now, people threatened to leave the country if it happened? They threatened again to leave the country if the Government were re-elected and, when they were elected a third time, still threatened to leave. Is my noble friend aware, as I am, of the number of people who repeatedly made those threats who are still around-some of them on the Opposition Benches?
Lord Myners: My noble friend's observations resonate with my own: the people who often threaten to leave are also those who keep telling me how critically important it is to maintain confidence in the UK banking system, and then go on to tell me that the best way of doing that is to pay them large bonuses.
Lord Hamilton of Epsom: Does the Minister's briefing book tell him what percentage of higher-rate taxpayers have to go abroad before the overall tax take drops with this higher rate rather than increases?
Lord Myners: No, it does not, but we have made adjustments for the behavioural consequences of a new higher rate of taxation and accordingly have significantly reduced the anticipated tax take. We still believe that it will be beneficial. The precision of the answer that the noble Lord seeks clearly depends on the rates of income of the individual people who chose to go overseas. It is clear to me that very small numbers of people appear to have gone overseas as a consequence of the increase in the highest rate of taxation. I remind the House that it applies to less than 2 per cent of the working population.
Lord Wallace of Saltaire: My Lords, does the Minister recall the Conservative's phrase "We're all in this together"? Are the Conservative Benches now implying that some of us want to bale out instead?
To ask Her Majesty's Government whether they will introduce a statutory registration system for the practice of herbal medicine in the United Kingdom before April 2011; and what assessment they have made of the consequences of not doing so.
Lord Pearson of Rannoch: My Lords, I beg leave to ask the Question standing in my name on the Order Paper. In doing so, I declare an interest as patron of the British Register of Chinese Herbal Medicine.
Baroness Thornton: My Lords, we recently consulted on whether and if so how to regulate herbal medicine practitioners. We have received more than 6,000 responses to the consultation. These are currently being analysed and a report is expected to be with Ministers by March 2010.
We are aware of the requirement for the UK to comply with European directive 2004/24/EC, including the end of the transitional period at 30 April 2011, and we will take this into account in reaching our decision.
Lord Pearson of Rannoch: My Lords, I am most grateful to the noble Baroness for that reply, which suggests that she is doing her best to be helpful. However, are the Government aware that some 25 per cent of the British population use over-the-counter herbal medicines and that some 5 million people visit a practitioner? Do the Government accept that, if they do not fulfil their promise made as long ago as 2001 to bring in statutory regulation by April next
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Baroness Thornton: The noble Lord is right to point to the dangers if we do or do not regulate. If we do not go down the route of statutory regulation, we will consider creating a national scheme under the derogation of medicine legislation, which would allow practitioners to continue while we resolve this issue. If we do regulate, the noble Lord knows that it will take time for those regulations to be laid because this is a complex area. We would have to use that derogation as well. We are well aware of the timescale and the risks involved.
Lord Walton of Detchant: I declare an interest as having chaired the House of Lords Select Committee inquiry into complementary and alternative medicinesome years ago. Does the Minister accept that some of the most powerful and effective remedies that are used regularly in medicine today are of herbal origin? However, certain remedies sold over the counter have been shown to be dangerous. For example, some traditional Chinese herb preparations contain a large number of different items, including on occasions aristolochia, which has been shown to be a seriously dangerous preparation that can cause serious renal damage. Is it not therefore in the public interest to introduce statutory regulation in order to be sure that practitioners of herbal medicine have been properly trained in scientific method and ensure that those who have not had such training can no longer practise?
Baroness Thornton: My Lords, the noble Lord points to the important reason why we must reach a decision on this matter and take action. These practitioners pose a greater risk than other complementary therapies because they involve skin piercing and so on. Acupuncture, herbal medicine and traditional Chinese medicine are the alternative medicines under consideration here. The noble Lord is right that central to our decision is how we protect the public from poor practice and use this as an important lever for driving up the standards of practice.
Baroness Pitkeathley: My Lords, I declare my interest as chair of the Council for Healthcare Regulatory Excellence, which promotes right-touch regulation. Does my noble friend agree that right-touch regulation must always focus on public protection and patient safety, not on promoting the interests of practitioners from whatever area?
Baroness Thornton: My Lords, my noble friend is absolutely right. We made clear in our 2007 White Paper, Trust, assurance and safety, that public protection should be the overriding reason for professional regulation of every sort. This is about protecting the public from poor practice. As I have said, this is the best way of protecting the public from unscrupulous and poorly practising practitioners. Statutory regulation is not the only way of doing this and it may not be the most appropriate. In the next month or so, Ministers need to decide whether we go down the statutory route or look for some other way to deliver this protection.
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